Home Loan Interest Rates-February' 2025
A list of current housing loan interest rates offered by India's top banks and financial institutions.
Home Loan Interest Rates-February’ 2025
Buying a house comes with sky-high home loan interest rates. One of the crucial financial decisions you’ll make is choosing the right home loan and the rate of interest. But did you know that the interest rate you choose can significantly impact your finances over the long term?
As a smart borrower, you want to make sure you’re getting the most competitive rates on your home loan to save money in the long run. With so many options available, it can be overwhelming to choose the right one.
NoBroker expert’s insights will guide you to easily select and compare home loan interest rates in India that fit your budget.
Types of Home Loan Interest Rates
Home loan interests are mainly of two types: Fixed Interest Rate and Floating Interest Rate.
Fixed Interest Rate:
It is the type of interest levied by the bank or financial institution which remains constant throughout the entire loan tenure irrespective of the change in the repo or the reverse repo rate. This rate is determined at the time of approval and sanction, borrowers opting for this type of rate feel comfortable with the consistent and assured monthly payments.
Since the rate of interest remains fixed and does not get impacted by market fluctuations, therefore borrowers can plan their loan repayments in advance, facilitating advanced financial planning. However, the fixed rate is usually 1% to 2.5% more costly compared to a variable rate loan. It is crucial to compare home loan interest rates to determine if a fixed-rate option is right for you.
Pros:
- The rate of interest remains constant throughout the tenure of the loan irrespective of the market changes.
- As the rate of interest is fixed throughout the loan tenure, therefore borrowers can plan their repayments in advance.
Cons:
- In this you are protected from the rising interest rates, similarly, you also can miss out on the opportunity of a dip in the market rates.
- Usually, the fixed rates are 1 to 2.5% more costly than floating interest rates.
Floating Interest Rate:
There is also a type of loan which comes with a floating rate of interest which changes from time to time depending on the benchmark rate. As a borrower, you can opt for a floating-rate home loan when the market trends are declining or are most likely to decline.
If the tracking benchmark rate declines, your interest on the loan also decreases resulting in lower EMIs. Moreover, availing a floating rate loan might not be suitable especially during a volatile market condition as the risk of raising the interest rates becomes high. It’s important to compare home loan interest rates before deciding on a floating rate option, as market fluctuations can impact your overall cost of the loan.
Pros:
- Floating rates of interest are nearly 1% to 2.5% cheaper as compared to fixed rates.
- There is always a possibility of gains from the market fluctuations, as if the benchmark rate decreases the floating rate will also decrease, resulting in lower EMIs.
Cons:
- If the benchmark rate increases the floating interest rate will also increase resulting in higher EMIs.
- Floating-rate loans are difficult to budget due to their volatile nature.
To make an informed decision, it is essential to compare home loan interest rates for both fixed and floating options to understand which one suits your needs better.
Fixed Interest Rates vs Floating Interest Rates: Key Differences
Home loans offer borrowers the choice between two types of interest rates: fixed and floating. Understanding the differences between these options can help borrowers compare housing loan interest rates and choose the most suitable loan for their needs and financial goals.
| Point of Differentiation | Fixed Interest Rate | Floating Interest Rate |
|---|---|---|
| Definition | Interest rate that remains constant for the entire loan tenure | Interest rate that fluctuates with market conditions Stability |
| Stability and predictability | Offers Stability and predictability as the interest rate is fixed and unaffected by changes in the market. | Offers flexibility but is subject to market volatility Interest Rate Movement. |
| Risk Factor | Minimal risk as borrowers know their exact repayment amounts throughout the loan tenure | Higher risk as borrowers may have to pay more if interest rates rise |
| Borrower Profile | Ideal for borrowers who prefer to plan their finances and want certainty in their repayment amounts | Ideal for borrowers who are willing to take some risk and want to take advantage of market fluctuations |
| Prepayment Penalty | Usually comes with a prepayment penalty if the loan is paid off early | Generally no prepayment penalty in case the loan is paid off early |
Comparing Home Loan Interest Rates
Here is the comparison of home loan interest rates offered by banks and NBFCs, along with the applicable processing fees, as outlined below. Use this information to effectively compare bank home loan interest rates before making a decision.
| Bank/ NBFC Name | Interest Rate | Processing Fees |
|---|---|---|
| Axis Bank | 8.75% – 14.00% | Up to 1% of the loan amount or Rs 10,000 (whichever is higher) + GST (as applicable) |
| Aditya Birla Capital Home Loan | 8.60% – 18.80% | Up-to 1% of the loan amount |
| Bandhan Bank | 9.15% – 13.32% | 0.25% – 1.00% |
| Bank of Baroda | 8.40% – 10.60% | Nil Processing fee |
| Bank of India | 8.40% – 10.80% | 0.25% of loan amt. Min Rs.2500/- & Max. Rs. 20000/- |
| Bank of Maharashtra | 8.35% – 10.90% | No Processing Fee |
| Canara Bank | 8.40%- 11.75% | Nominal processing fee of 0.50% (Min Rs.1500/-+GST and Max. Rs.10,000/-+GST) |
| Central Bank of India | 8.50% – 9.50% | Waived up to 31.03.2025 |
| YES Bank | 9.00% to 12.00% | 1.5% of the loan amount or Rs. 10000 whichever is higher |
| Corporation Bank | 8.35% – 12.62% | 0.50% |
| Union Bank of India | 8.35% – 10.75% | 0.50% or ₹15000 + GST (whichever is lower) |
| Federal Bank | 8.80% – 10.30% | 1.00% |
| SMFG India Credit Co. Ltd | 10% Onwards | Up to 3% of the loan amount |
| HDFC Bank | 8.75% – 9.95% | Up to 0.50% of the loan amount or Rs. 3300/- whichever is higher + applicable taxes |
| HSBC | 8.50% – 14.00% | 1% or INR 10,000 whichever is higher |
| ICICI Bank | 8.75% – 10.05% | Up to 2% of loan amount. |
| IDBI Bank | 8.50% – 12.75% | 5000-15000 |
| IDFC First Bank | Starts from 8.85% | Up to 3% of loan amount |
| Indian Overseas Bank Home Loan | 8.50% – 9.60% | – |
| Sammaan Capital | 8.75% to 15.00% | 0.50% onwards of loan amount |
| Jammu and Kashmir Bank | 8.75% – 9.85% | 0.25% of Loan amount + applicable GST |
| Karnataka Bank | 8.75% – 11.74% | 0.50% – 2% |
| Karur Vysya Bank | 9.00% – 11.05% | ₹2500 – ₹7500 + GST |
| Kotak Mahindra Bank | 8.75% onwards | 0.50% |
| LIC HFL | 8.50% | 0.50% onwards |
| PNB HFL | 8.50% – 11.45% | 0.35 |
| Reliance Home Finance | 9.75% – 13% | 0.50% – 1.50% |
| State Bank of India | 8.50% – 9.65% | 0.35% |
| Sundaram Home Finance Ltd Home Loan | 8.75% onwards | Rs.3,000 + GST |
| Tata Capital | 8.75% | Rs.999 + GST |
Note: Citi India consumer banking customers are now served by Axis Bank. Citi India has transferred ownership of its consumer banking business to Axis Bank (registration number L65110GJ1993PLC020769).
Note: Dena Bank was a government-owned bank that in 2019 merged with Bank of Baroda.
Note: Fullerton India Credit Co. Ltd., now known as Sumitomo Mitsui Financial Group (SMFG) India Credit Co. Ltd
Note: In July 2024, Indiabulls Housing Finance was renamed as Sammaan Capital
How to Use NoBroker’s Home Loan EMI Calculator?
- Visit NoBroker Home Loan EMI Calculator
- Enter the loan amount, the interest rate charged by the lender, and the loan tenure.
- The EMI calculator will then display the monthly EMI that you would need to pay for the specified loan amount, interest rate, and tenure.
- Additionally, the calculator will also display a pie chart showing the percentage of EMI going towards principal and interest respectively.
Home Loan EMI Calculation Process
After comparing home loan interest rates, you should check the EMIs for the same. EMI stands for Equated Monthly Installment. It is the fixed amount that a borrower needs to pay to the lender every month until the loan is fully repaid and it includes both the principal amount and the interest.
Let’s assume that the borrower wants to take a home loan of INR 50 lakhs for a tenure of 20 years (240 months) at an interest rate of 7%. The EMI calculation can be done as follows:
The first step is to calculate the monthly interest rate by dividing the annual interest rate by 12. In this case, the monthly interest rate would be:
Monthly interest rate = 7% / 12 = 0.583
The EMI can be calculated using the following formula:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
where:
P = Loan amount = INR 50,00,000
R = Monthly interest rate = 0.583%
N = Loan tenure in months = 240
Substituting these values in the formula, we get:
EMI = [50,00,000 x 0.00583 x (1+0.00583)^240]/[(1+0.00583)^240-1]
EMI = INR 38,586 (rounded off to the nearest rupee)
Therefore, the EMI for Rs. 50 lakhs at an housing loan interest rate of 7% for 20 years would be Rs. 38,586 per month. This means that the borrower would have to pay Rs. 38,586 every month for 240 months to repay the loan in full.
Best and Affordable Home Loan Interest Rates
Buying a home is a major investment for most people, and finding the lowest home loan interest rate can significantly reduce the overall cost of the loan. The table below provides an overview of some of the best and most affordable home loans available in the market, based on factors such as interest rates, loan terms, fees, and eligibility criteria.
| Lender | Interest Rate | Maximum Loan Amount | Maximum Tenure |
|---|---|---|---|
| State Bank of India Home Loan | 9.55% | 5 Crores | 30 Years |
| HDFC Ltd. Home Loan | 8.50% – 9.60% | 10 Crores | 30 Years |
| Kotak Mahindra Bank Home Loan | 8.85% – 9.40% | 10 Crores | 20 Years |
Factors Affecting the Home Loan Interest Rate
Several factors can affect the loan interest rate and might influence the cost of borrowing. Here are the factors outlined below:
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Financial Profile of the Applicant:
The first and foremost thing that can influence the home loan interest rate is the financial profile of the applicant. The financial profile of a borrower can refer to several aspects such as income stability, outstanding obligations etc. A salaried individual, employed in a reputable organisation with a sufficient monthly income has a higher probability of getting the loan approved.
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Benchmark Lending Rate:
The benchmark lending rate refers to the rate based on which the bank or financial institution determines the floating rate. There are various benchmark rates used by different banks and financial institutions. It includes MCLR (Marginal Cost of the Fund-Based Lending Rate), PLR (Prime Lending Rate) or RLLR (Repo-Linked Lending Rate).
Banks and financial institutions usually set a reset period of MCLR for a duration ranging from 3 months to 2 years. On the other hand, the RLLR is directly linked with the RBI’s repo rate and has a higher possibility of fluctuations with every policy change.
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Loan to Value Ratio:
Loan-to-value ratio or LTV is the maximum amount extended by the lender to the home loan applicants as a percent of their property’s present market value. A higher LTV means higher financing value but also increases the risk of lending. Whenever the risk of lending increases the rate of interest also increases, i.e. lenders with a higher LTV usually charge higher interest compared to lenders with a lower LTV.
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Credit Score:
A credit score is one of the prime factors affecting the home loan interest rate. A credit score reflects the creditworthiness and the credit repayment behaviour of an individual. Therefore, a person with a higher credit score is perceived as a low-risk individual compared to a person with a poor credit score. A credit score of 750 and above is considered good by the lending institutions.
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Loan Amount:
The amount of loan can also affect the interest, the higher the loan amount the higher the rate of interest. In case you have enough funds try to make a higher down payment as it reduces the repayment burden and helps you to avail at competitive rates.
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Repayment Tenure:
The repayment tenure of the loan can also influence the interest rates. This is mainly due to the fact that loans with longer repayment duration are more risky for lenders compared to loans with shorter duration.
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Income Stability:
The source of income and income stability also play a crucial role in determining the interest rates. If you have a steady source of income or a stable job there are very high chances that you will secure a home loan with lower interest rates. For example: A salaried individual employed in a government organisation or a PSU can get better rates due to their job stability.
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Property Location:
If the property you are willing to purchase is situated in a well-connected area with all the required amenities, the interest rate is likely to be lower due to its higher resale value. On the contrary, a property with a lower resale value can attract higher interest rates.
Things to Consider Before Taking Home Loan
Before taking out a home loan, there are several factors to consider to ensure that the borrower is fully prepared and capable of managing the loan responsibly. Here are some important things to keep in mind:
Accessing Financial stability
The borrower should assess their financial stability and ability to repay the loan in the long run by taking into account the possibility of unexpected expenses such as medical emergencies or job loss.
Evaluating the Credit score
A good credit score is a critical factor in determining the applicant’s loan eligibility and interest rates. The borrower should check their credit report and score before applying for a loan, and take steps to improve their score if necessary.
Consider Down-Payment
Save for a down payment as it reduces the loan amount and the interest burden and aim to save at least 20% of the property value as a down payment.
Compare Lenders
The borrower should research the reputation of potential lenders and read reviews from past clients and also compare home loan interest rates. They should also check if the lender is licensed and accredited.
Pre-Approved Loans
Before shopping for a home, the borrower should get pre-approved for a loan to know their budget and improve their bargaining power. Pre-approval also speeds up the loan application process.
Final Words
To sum up, home loan interest rates can be of two types: fixed rate and floating rate. The fixed rate remains constant through the loan tenure. On the other hand, the floating rate is linked with a benchmark rate such as PLR, MCLR and RLLR which keeps on fluctuating from time to time. Additionally, several factors can influence home loan interest rates, including the applicant’s profile, LTV ratio, credit score, income stability, and more. However, before finalising a home loan, it is important to compare multiple lenders to find the best deal for you.
